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Consumer Sentiment Survey - Summer 2022

Consumer sentiment falls again as all consumers feel the squeeze

Young and old, rich and poor, the cost of living is on everyone’s minds. More than three-quarters of consumers have cut back on spending in the past three months, as people buy less or trade down in an attempt to ease financial pressures. This has led to another significant drop in consumer sentiment, which now sits lower than at any point during the pandemic. 

Sentiment drops as the cost of living rises

Consumer confidence continues to decline. And fast. 

In March 2022, our Spring Consumer Sentiment showed the biggest one-year decline in confidence since the global financial crisis, inflation driving a growing divergence between demographic groups, and post-pandemic pent-up demand all but evaporating.

We’ve seen another significant drop, as the cost-of-living crisis finally hits all demographics. Now at -36, sentiment is lower than at any point throughout the pandemic.

This is now the true impact of the cost of living crisis across the UK. Coupled with the findings from our Consumer Reconsidered report, which showed changes to the way people shop, who they trust and what they value, retail and leisure operators face an increasingly complex challenge. 

Last summer, sentiment had peaked (at +10) but has rapidly and consistently declined since. A 46-point drop in the last 12 months has continued the biggest sustained decline in our survey since the 2008 Global Financial Crisis. 

Sentiment has only been lower on two occasions: immediately following the Lehman Brothers collapse in 2008 (-51) and during the post-recession austerity period in 2012 (-42). With more inflationary and cost-of-living pressures to come, sentiment may even dip below these historic lows in the future, particularly with another rise in utilities set for Autumn this year likely to affect all, and our PwC Economics team forecasting inflation to potentially peak at 11% in Q4 2022, and the energy price cap to increase by over 50% in October.

Young and old, rich and poor - everyone is affected

Our Spring sentiment showed significant divergence between demographics. Even though confidence fell across almost every group, the gap between the most and least optimistic was widening. This time, however, it has declined across all demographics and socioeconomic groups, with 76% of consumers worried by the rising costs of living. 

The under 25s remain net positive, many likely sheltered from the rising costs by living with parents or not being responsible for increasing bills. Even so, they have still seen a significant drop in sentiment, similar to those seen in the middle and older age groups. Over 65s have joined the 55 to 64s as the groups with the lowest sentiment (-56), driven by increases in utilities, fuel and food prices. This is interesting, because it almost contradicts the previous chart - where over 65s are less concerned about the cost of living than other groups, perhaps because they remember the last time inflation was this high - over 40 years ago 

There have also been drop-offs among all levels of affluence, with a significant decline in the professional classes, who had previously appeared to have the greatest financial resilience to the pressures in our last sentiment. 

Concern over the rising cost of living combined with evaporating confidence has seen 78% of all consumers make spending cutbacks over the past three months. While younger age groups claim to have cut back in slightly more areas of spending than older generations, it’s because they typically have more options available - they’re more likely to have subscriptions, order more takeaways and eat out more regularly, for example. We’ve also seen little difference across affluence levels, as all demographics now feel a necessity to cut back on spending, even if it is on different things. 

Where are people cutting back?

Consumers are looking to tighten spending habits everywhere, buying less or trading down in almost every category.

Holidays appear to be more protected than perhaps expected this year, as relatively few people look to postpone. With many missing out over the last two years, it may be one sacrifice consumers are unwilling to make. 

Eating out less is one area where the more affluent have looked to cut back, likewise, younger generations have opted for fewer takeaways or deliveries.

“Our latest survey demonstrates that all consumers across the country are feeling the effects of the cost of living crisis and subsequently looking to tighten their spending habits.

With most consumers undertaking some form of cutting back and over a third looking to trade down to cheaper items, eat out less and make fewer purchases in general, retailers and operators must ensure product lines can be adapted to suit varying levels of available income.

Unfortunately, things will get worse before they get better. Retailers and hospitality operators will be predicting tougher head winds as the Covid recovery stalls and you cannot extinguish the possibility of business failures without further government support for the sector.”

Lisa Hooker, Industry Leader for Consumer Markets at PwC UK

Help yourself by helping consumers

This cost-of-living crisis continues, and is only expected to deepen. And it will be of little surprise if sentiment continues to drop, too. As a result, the advice in our Spring sentiment remains as relevant now as it did then. 

Retailers and operators must help consumers mitigate their own financial challenges now if they are to be remembered and rewarded in the future. But they also need to do so while protecting themselves from the financial squeeze if they are to survive.

In our latest report, The Consumer Reconsidered, we looked at how the relationship between brands and consumers has fundamentally changed. Consumer expectations are increasing as loyalty decreases, and new challengers and channels are emerging. But those that can help consumers navigate this tough environment may be able to predict, prepare and adapt to change, build trust and create experiences that protect value and deliver sustained growth.

About the research 

1. PwC’s latest consumer sentiment survey was conducted between 17-20 June 2022 and includes responses from a nationally representative sample of 2,104 adults.

2. PwC has asked the same question every few months since April 2008: “Thinking about your disposable income (money remaining after household bills, credit cards, etc.), in the next 12 months do you expect that your household    will be better off or worse off?”. The index is calculated by subtracting the percentage of people who think they will be worse off from those who think they will be better off. Historically this index has provided an insight into the pulse of the nation, and has been a good indicator of future consumer spending patterns.

Contact us

Lisa Hooker

Lisa Hooker

Leader of Industry for Consumer Markets, PwC United Kingdom

Tel: +44 (0)7802 882562

Kien Tan

Kien Tan

Director, Retail Strategy, PwC United Kingdom

Tel: +44 (0)7880 552726

Jacqueline Windsor

Jacqueline Windsor

UK Retail Leader, PwC United Kingdom

Tel: +44 (0)7801 074739

David Trunkfield

David Trunkfield

UK Hospitality, travel and leisure Leader, PwC United Kingdom

Tel: +44 (0)7764 235446

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